Editorial: Appointment pains

The appointment process for the Bank of Israel’s governor is just another issue that the public feels it has the right to influence.

Bank of Israel 370 (photo credit: Wikimedia Commons)
Bank of Israel 370
(photo credit: Wikimedia Commons)
In less than a week, a second candidate to replace Stanley Fischer as governor of the Bank of Israel has abruptly backed out.
First it was Jacob Frenkel, chairman of JPMorgan Chase International and an internationally renowned economist.
Frenkel withdrew his candidacy to serve a second stint as head of the central bank last week amid accusations he had shoplifted. Though charges had never been brought against him and though the incident took place in 2006, for the news media, and for the public, it was enough that suspicions had been raised that Frenkel had walked out of a duty free shop at Hong Kong’s international airport without paying. The campaign of character assassination was launched.
Failing to defend himself convincingly in the media, Frenkel decided to forfeit the dubious honor of serving as governor and stay put at his lucrative JPMorgan post.
Next came Leo Leiderman, chief economist as Bank Hapoalim. The circumstances of Leiderman’s decision are less clear. The office of Prime Minister Binyamin Netanyahu simply announced just 48 hours after his appointment that Leiderman no longer wished to be considered a candidate for the post.
Leiderman said that after “family consultations” he decided to give up the opportunity to serve as governor, preferring a more private life as lecturer at Tel Aviv University and as Bank Hapoalim’s chief economist.
A Channel 10 report claimed that Leiderman frequented an astrologer. Even if that were true, it would not be grounds to disqualify the man. Leiderman would, after all, have to justify policy decisions by quoting from more than just astrological forecasts.
Whatever the reason for Leiderman’s sudden change of mind, the second failed appointment, which one senior Bank of Israel official called a “fiasco,” seems to be connected to the rushed choice made by Netanyahu, which traditionally also receives the okay of the finance minister.
Though Fischer announced his decision to step down back in January – providing plenty of time to find a replacement – Netanyahu either procrastinated or spent a lot of time trying to convince Frenkel.
But after Frenkel’s last-minute pullout, a full month after Fischer officially stepped down, Netanyahu was forced to scramble for another candidate. The vetting process was, unfortunately, not thorough enough. Essentially, the prime minister alone has the power to elect the governor. And once in office the governor enjoys a tremendous amount of leeway in decision-making.
An important reform instituted by Fischer during his stint and included in the Bank of Israel Law dictates that all monetary policy decisions must be made within the framework of a special monetary committee.
Thanks to Fischer’s reform, gone are the days when the governor could, theoretically, decide monetary policy single-handedly.
Now some are calling to revamp the appointment process for the governor of the Bank of Israel as well. Knesset Economics Committee head Avishay Braverman said he is mulling legislation to that effect.
There does seem to be a lacuna. The law should at the very least stipulate that the appointment process must begin early enough before the outgoing governor is slated to step down and that a minimum number of prospective nominees be considered for the position.
We live in an era of increased civic engagement. Once upon a time the Israeli public was willing to reconcile itself to a political reality in which it had little, if any, say regarding decisions or appointments the prime minister and other senior political leaders made behind closed doors.
The socioeconomic protests of the summer of 2011 were the boldest expression of the sea change that has taken place. Israelis are no longer willing to show deference to government decisions except, perhaps, with regard to security-related ones, which, of necessity, are made without public scrutiny.
The appointment process for the Bank of Israel’s governor is just another issue that the public feels it has the right to influence. Frenkel and Leiderman are, admittedly, casualties of this public awakening. But perhaps if the appointment process had been conducted more professionally, and Frenkel and Leiderman had been given the opportunity to respond to their critics, Netanyahu would not be in the uncomfortable situation of searching for a third candidate to replace Fischer as governor of the central bank.